INCOME TAX ACT, 1961

Section 14A Rule 8D(2)(iii)

Disallowance under section 14A - Expenditure against exempt income - Applicability of section 14A as regards share of profit from joint venture. -

Assessee had shown exempt income in the form of share of profits from joint ventures (JVs) in respect of which investment of Rs. 4,641 lakhs was made. AO invoked computation mechanism provided in rule 8D(2)(iii) and arrived at the disallowance of Rs. 23,60,000. Held: Assessee had not made any physical investment in joint ventures and figures represented in the investment schedule was nothing but share of profit from joint ventures over all the years and hence, entire computation mechanism provided in rule 8D(2) failed as the substance of the transaction would prevail over its form. Though assessee had shown the accumulated share of profits from joint ventures under the head 'investment', it was effectively a current account transaction or loans given to the joint ventures by the assessee and same did not partake the character of actual investments, if any, made by assessee in the joint venture. Hence, entire computation mechanism of rule 8D(2) failed and hence, there could not be any disallowance under section 14A.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2014-15 & 2015-16

INCOME TAX ACT, 1961

Section 254(1)

SUBSCRIBE FOR FULL CONTENT